Despite the structural challenges and the sombre mood, the sheer scale of Germany’s announced fiscal stimulus – €500bn for infrastructure and a ‘whatever it takes’ stance on defence – remains a powerful argument against giving up too early on the German economy. In fact, the latest fiscal data suggests that the country is still suffering from this summer’s political struggle to agree on a budget for 2025. Many government expenditure categories fall short of reaching their annual targets.
For instance, despite an increase in October, direct military expenditures after the first 10 months of the year had not even reached 50% of the full-year target. The same holds true for other public investments. Assuming that this underspending is due to the budget woes of the summer – and not due to brinkmanship or an administration’s inability to bring the money to work – means that fiscal policies should finally push the economy out of stagnation next year.
At least for now, hope remains that fiscal stimulus in Germany could be like the good old ketchup bottle: initially, no matter what you do, nothing comes out of the bottle until suddenly the whole thing splashes out at once. It won’t make the structural problems go away, but it could at least be a reason to occasionally switch to another U2 song in Germany next year: it’s a beautiful day.